No one wants to think about taxes during the holiday season. However, if you’re filing for divorce during the holidays, your taxes may be impacted.
If you and/or your spouse are considering divorce, there will be implications for your taxes. Remember how beneficial it has been to file a joint return? Depending on when you file and when your divorce is finalized, you may still be able to claim that benefit one last time.
The Benefit Of a “Married, Filing Jointly” Tax Return
There are plenty of benefits to filing a joint tax return when you are married. Some of these include:
- Lower tax rates: Married couples often qualify for lower tax rates when filing jointly. The tax brackets for joint filers are more favorable than those for single filers, which can result in a lower overall tax rate for the combined income.
- Higher tax deductions and tax credits: Joint filers typically have access to higher standard deductions, which can significantly reduce taxable income. Additionally, they may qualify for multiple tax credits that are unavailable or reduced for single filers, such as the Earned Income Tax Credit, Child and Dependent Care Credit, and education credits.
- Greater IRA contributions: Joint filers may be able to contribute more to an IRA (Individual Retirement Account), especially if one spouse doesn’t work or earns significantly less.
- Inheritance benefits: Joint filing can be particularly advantageous for estate planning and inheritance tax purposes, as it often results in lower taxes on inherited amounts.
- Relief in the case of a spouse’s death: In the year of a spouse’s death, the surviving spouse can still file a joint return, which can provide financial and administrative relief during a difficult time.
To be clear, there are certain situations when filing your taxes separately would be more advantageous. If you have questions about filing your tax return, you should consult a CPA or tax professional.
If I File for Divorce Before the End of the Year, Can We Still File a Joint Tax Return?
If you have filed for divorce, but your divorce is not final, you can still file a joint tax return. When we talk about a divorce being final, it means that the judge in your divorce case has signed your Judgment of Divorce and filed it with the court register.
If you get divorced before the end of the year, even if the judge signs the judgment on December 31, you must file separate individual tax returns. It should be noted that there is a sixty day waiting period in Michigan where the courts cannot grant a judgment of divorce that begins on the date you file a complaint for divorce and in most cases it takes at least six months to finalize a divorce. This means you will probably still be married at the end of the year in which you file for divorce unless you file relatively early in the year.
Do I Have to File a Joint Tax Return With My Spouse if the Divorce is Not Final by the End of the Year?
No, you actually never have to file a joint return with your spouse. However, as we discussed above, it is usually advantageous to file jointly with your spouse. The judge in your case cannot order you to file jointly, however, the court can order that any tax refund received be split evenly between the parties. If one party files separately without the agreement of the other party in an attempt to snatch a refund, the court can order that party to reimburse the other party for their share of the refund as well as for the loss of the tax benefits that they would have obtained by filing jointly. This means if one party plans to file individual returns before the divorce is final, that party should obtain the written agreement of the other party.
In situations where one spouse’s actions could negatively impact both parties’ tax obligations, the court may decide to permit the unaffected spouse to file taxes separately. This decision would also involve requiring the other spouse to cover any resulting tax liabilities. This issue needs to be presented in divorce proceedings to ensure the protection of the non-liable spouse. Generally, if both parties can cooperate regarding tax savings, filing jointly is advisable. Additionally, in scenarios where a divorce judgment is poised to be finalized close to the year’s end, the court might consider delaying the judgment until after the new year. This delay would allow the couple to file a joint return for that year, enabling them to benefit from the tax advantages of joint filing.